Tuesday, October 26, 2010

Telephone banking? Hardly

Another hideous story about banks and recession reaches me. The boss of a small company had to call in the receivers – because he couldn’t call in his bankers.

For months the poor man has been trying to attract the attention of his friendly neighbourhood bankers.

Though we, the taxpayers, own this bank, its staff ignored him, never returned his calls, didn’t bother to look at his e-mails and were “not in” when he visited. As the company’s cash-flow got worse, the boss grew desperate.

Last year he cut his employees from 26 to 13. Things have looked a bit better in the past few months.

Unfortunately, he makes children’s toys so the best time for business is in the build-up to Christmas.

To get to the most profitable time of year, he needs to spend money before he can accumulate it again. This is where the bank is supposed to help with loans and overdrafts.

Our man needed £50,000 – not much in the great scheme of things. He never got it.

Now the banks are under scrutiny, they are reluctant to say no to someone like my toy-maker. They might get into trouble with the politicians – and then what would happen to their multi-million pound bonuses?

It’s much easier to pretend your customers never even bothered to ask for your help. Ignore them and hope they go away – or go bust – without the need to turn them down flat.

The truth is, banks have changed. A few years ago, they threw money around like confetti.

These days, they won’t lend you a penny unless you pay hefty charges, extortionate rates of interest and promise them your house, car, golf clubs, wife, kids and dog if it all goes wrong.

On Tuesday there was a little demonstration outside the Council House in Birmingham as Unison members held a sing-song in protest over the axing of 200 jobs.

A young woman handed me a leaflet calling on me to join a “stuff your cuts, we won’t pay” demo outside the International Convention Centre on October 3 when the Conservative Party conference kicks off there.

To add extra potential for unhappiness, it seems the police are trying to divert the protestors away from the ICC.

This is all in aid of protecting heavily unionised public-sector workers, who seem to think they are on the “front line” when it comes to the new austerity.

They are mistaken. The first blast of cold air is already rushing through the private sector. Look what’s happened to the public housing maintenance firm Connaught.

Quite why it went bust is a bit of a mystery. It had contracts with local authorities and, even if they were being run down, that doesn’t really justify calling in the receivers.

It’s clear, though, the threat of Government spending cuts had already hammered the company’s share price.

It’s happening to dozens of businesses, especially construction firms which have seen plans to build new schools shrivel and die.

Supposedly, we have clambered out of recession and the economy is improving. Most experts think it’s unlikely we’ll fall back into another one – the much-feared “double dip” – but it is a real possibility.

We won’t know the full impact of Government spending cuts until October 20, when Chancellor George Osborne delivers the bad news.

What’s worrying is how Ministers go on about what desperate financial times these are. I understand they want to place all the blame on Gordon Brown.

But they lay it on so thick it’s enough to make the average consumer stay at home and hoard tins of baked beans rather than stimulate the economy by going shopping.

David Cameron’s rhetoric is making things worse. The economy needs public spending cuts and they will have nasty consequences, in the short term anyway.

When the marchers reach the ICC next month, when public sector workers go on strike, when riots take place in Westminster and when tax hikes lead to a spending slump, do people like Cameron and Nick Clegg have the courage to stick to their plans?

Even if the dynamic duo stand firm, will their parties? The Lib-Dems are already pretty flaky.

Few of their MPs or members signed up for the toughest austerity package in history – an election tomorrow and they’d be out on their ears.

In opposition, their hero Vince Cable, now an unhappy Business Secretary, was full of talk about reining in the banks, tackling obscene bonuses and forcing them to lend to small businesses again.

Since getting power? Nothing.

For the Coalition to survive, the least it must do is make sure private businesses also survive. That means dealing with the banks.

There are options. Vince could, for instance, prevent banks demanding personal guarantees from company directors. He could make banks take on the debt many companies now have with the taxman.

He could insist that all bank bonuses are paid into a fund to support small businesses and the money could only be taken out after five years.

If he could make bank managers answer the phone once in a while it would be a start.